List of Tables
Table of Contents
1.Introduction
1.1 Introduction……………………………………………………………………………………………………………………………………………………………….1
1.2 Objectives of Research…………………………………………………………………………………………………………………………………………1
2. LITERATURE REVIEW
2.1Introduction………………………………………………………………………………………………………………………………………………………………1
2.2 Retail Banking in the UK……………………………………………………………………………………………………………………………….….…2
2.2.1 Personal Current Accounts and Pricing…………………………………………………………………………………………..………….3
2.2.2 Innovation and Technological Development……………………………………………………………………………………….……4
2.3 Consumer Behavior………………………………………………………………………………………………………………………………………………5
2.3.1 Bank Selection Criteria………………………………………………………………………………………………………………………………….….6
2.3.2 Customer attrition rates……………………………………………………………….………………………………………………..…………….…8
2.3.3 Opening and switching accounts………………………………………………………………………………………………….………….…10
2.3.4 Multi-banking…………………………………………………………………………………………………………………………………….…………….…11
2.5 Generational Differences……………………………………………………………………………………………………………………………….…12
2.5.1 Views on Security & Biometrics………………………………………………………………………………………………………………….13
2.5.2 Views on Innovation / Change in needs……………………………………………………………………………………………………14
2.6 Summary……………………………………………………………………………………………………………………………………………………………………….…15
3. Methodology
3.1 Introduction……………………………………………………………………………………………………………………………………………………………….………5
3.2 Objectives and Information Required………………………………………………………………………………………………………….…………5
3.3 Research Design………………………………………………………………………………………………………………………………………………….…………5
3.4 Questionnaire……………………………………………………………………………………………………………………………………………………..….………..5
3.4.1 Questionnaire Sequencing…………………………………………………………………………………………………….……………….………..5
3.4.2 Question Design…………………………………………………………………………………………………………………….………………….………..5
3.5 Sample Size and Population
3.6 Pilot Test
3.7 Data Analysis
3.8 Summary
4. Analysis of Data and Findings
4.1 Introduction
4.2 Sample Obtained
4.3 Question Analysis
4.4 Summary
5. Conclusion
5.1 Introduction
5.2 Key Findings
5.3 Limitations
5.4 Practical Implications for Market Participants
5.5 Further Research
1.Introduction
2. LITERATURE REVIEW
2.1 Introduction
This part aims to review literature on the UK retail banking sector and consumer behavior, with an emphasis on customers under 30.
2.2 Retail Banking in the UK
The UK retail banking market is characterized by high barriers to entry, intense competition and a small number of financial institutions that own a large share of the market. These factors make it hard for new players to enter this market. (CMA, 2015)
The barriers to entry can be natural, regulatory or first mover advantages. Banking is a highly regulated industry, and joining it involves meeting a range of requirements and going through a lengthy authorisation process. New changes in regulation have added more flexibility to the process. They allow financial institutions to initially gain an authorisation that has some restrictions. The Competition & Markets Authority argues that this change removes the authorisation process as a barrier to entry. (CMA, 2015)
Access to distribution channels, payment systems,or funding represent natural barriers(CMA, 2015). Although branch usage has been declining significantly and digital channels have become the most popular method to interact with banks, branches still remain the most important channel for acquiring retaining PCA customers. Transactions are mainly performed using online channels, which have been found to also increase customer engagement with PCAs. This shift to online distribution channels offers the opportunity to lower operational and entry costs by decreasing the number of branches required.
First mover advantages help retail banks gain customers, something that is quite difficult in a concentrated market. (CMA, 2015) In 2013, the four largest banks, HSBCG, RBSG, Santander UK Plc, LBG and Barclays, accounted for 75% of the market. (OFT, 2013 ) A report by the ICB (2011) indicated that the same four banks had 77% of PCAs and 85% of SME current accounts in 2011.
2.2.1 Personal Current Accounts
Personal current accounts, or PCAs, allow customers to store wealth, send or receive money transfers and borrow money on a short-term basis. An investigation by the CMA (2015) into the UK retail banking market reports that 97% of adults living in the UK have PCAs and highlights the sector’s significance to the UK economy.
Although banks offer a wide range of PCAs, standard or reward accounts represented 75% of UK PCAs. Users of reward accounts can benefit from better terms on bank products, cash back or other rewards. (OFT, 2013) UK students and graduates can apply for special student or graduate accounts, which provide better interest rates. In 2014, they represented almost 3% of PCAs. (CMA, 2015)
A report by the House of Commons Treasury Committee (2011) suggest that the free banking model represents a great barrier to competition. This model does not require paying fees for ordinary operating activities, such as making transfers. It is in contrast to the model that was in place before 1985, which made customers incur charges for every performed.
Price offering in financial institutions mainly consists of interest rates offered on savings and charged on loans. (Llewellyn and Drake, cited in Thornton and White, 2001) It has been found to have an effect on customer satisfaction and perceived quality. Having a lower price than competitors has also been identified as a value adding factor. (Devlin, 1997) The increase in competition in the financial industry has made it harder for financial institutions to compete on price. (Zenoff, cited in Thornton and White, 2001) Balmer and Stotvig (1997) found that due to limited differentiation, product standardisation and pricing similarity, competing on price alone does not lead to a long term competitive advantage.
2.2.6 Innovation and Technology Developments
In 1992, Brown predicted that competition was going to increase in the future, due to technological advancements and the globalisation of financial markets. Thornton and White (2001) argued that this signaled the need for non-price factors to be used in order to achieve differentiation, revenue growth and improved market share.
Technology is one way in which financial institutions can increase their competitive advantage (Malhotra and Singh, cited in Sekhon et al., 2015). In a well-functioning market, investing in innovation will improve customers’ diversity of choice, provide cost efficiencies and enhance service levels. (House of Commons, 2011) This is supported by Furst et al.(1998), who suggests that investing in technology innovation increases profitability or reduces costs, both of which can lead to long-term financial results.
The two main product innovations in PCAs are reward accounts and switching incentives, usually in the form of cash payments. They aim to attract customer deposits, as well as promote frequent and regular transactions.
The digitalisation of retail banking has opened many opportunities for service innovations in the PCA market and continues to be an area where significant investments are made.
Account aggregators are designed to help customers monitor their spending and saving habits, making managing bills and payments easier. Customers also receive recommendations for products and services based on their detailed financial data. This service has had a slow entry in the UK market compared to the USA market, where it has a higher penetration rate. (House of Commons, 2011)
The uptake and development of this service depends on a series of barriers.
One such difficulty, is the comparison of the different PCA services offered by banks in the UK market. Another relevant barrier would be that third parties would require access to the account usage data collected by banks, which raises concerns about data security and transparency.
If these barriers will be overcome, the service can lead to increased financial awareness, higher customer engagement and become a new distribution channel.
Increased access to internet connections and high smartphone adoption rates have allowed internet and mobile banking to increase significantly, becoming important distribution channels. The UK is a global leader in terms of mobile banking and smartphone adoption, with one out of three customers using the former and just under 65% the latter. (Deloitte, 2015) A report by EY together with the BBA (2015) shows that App based mobile banking has recently become more popular than internet banking, a trend that is predicted to grow even more in the future.
There are significantly large discrepancies in the functionality between PCA banking apps from the main UK retail banks. (Deloitte, 2015) All of them allow customers to check their balance and most of them have a function to send money to a mobile number or locate the nearest branch. Conversely, only a couple of them allow customers to make payments to new recipients and only one has fingerprint authentication. As smartphones with fingerprint scanners are becoming less uncommon, more applications will start adopting the fingerprint authentication method, also knowns as Touch ID.
An even higher smartphone adoption rate among generation Y and Z, together improvements in functionality, will lead to significant growth in mobile banking adoption over time. It is predicted that by 2020, mobile banking will be used to manage PCAs far more than all other channels combined. (CACI, 2015)
Al-Hawari and Ward (2006) found that most of the benefits are captured by the first bank to possess a distinctive innovative feature. Banks that only follow might not be able to retain customers and improve profitability. If the services they offer are standardised and non-differentiated, customers will easily compare offers and switch banks. They concluded that banks which invest a lot in technology gain an improved perception of excellence.
2.3 Consumer Behavior
This sections will cover how customers choose their banks, the number of institutions they bank with and how often they change financial institutions, as well as their reasons for this.
2.3.1 Bank Selection Criteria
A survey conducted by Kaufman (1967) in the USA, identified branch location, service level received and duration of the customer-bank relationship as the three main bank selection criteria in the USA. In terms of location, customers were more likely to choose banks which had branches close to their home or workplace. A study by by Mason and Mayer (1974) compared two groups of customer that were using PCAs and also concluded that location was the most important factor. It was followed by friendly personnel, favorable loan experience, recommendations by friends and family influences.
In a study by Javalagi et al. (1989) that analyses consumer bank selection criteria in the USA, financial factors, such as interest rates on savings, borrowing rates and loans availability, were found to be the most important. Location was once again among the most important criteria, alongside the reputation of the bank.
Focusing on a group of students from the USA, Kazeh and Decker (1993) identified service charges, reputation, borrowing interest rates on loans, swift loan approval and friendly staff as the most relevant factors.
In an article by Driscoll (1999) about the future of retail banking, it is suggested that banks will need to adopt a customer-centric approach. Five criteria were identified as driving customer choice. These were convenience, price, product selection, service and ambiance, or customers’ experience.
2.3.2 Customer attrition rates
One of the greatest challenges to gaining new customers in the UK retail banking sector is the low attrition rate. A recent study by the FCA (2014) names customer inertia and account opening or switching as the most important barriers.
A survey by YouGov and ACI Worldwide (2015) reported that 88% of retail banking customers had no intention of switched their main financial service provider wishing the next 12 months. These low switching rates are also confirmed by a report from the House of Commons Treasury Committee (2011). RBS reported an annual switching rate of 9% and Lloyds Banking group between 7-11%. It has been argued by Benny Higgins, the current CEO of Tesco Bank, that the figure would be around 3% if secondary accounts were not included. The CEO of Virgin Money, Jayne–Anne Gadhia, reinforced this idea, claiming the real rate lies under 5%.
The financial crisis has been identified as a factor that increased customer’s risk aversion and contributed to their reluctance to switch. The low switching levels were compared to those in the utilities sector, which have higher rates of over 26%. Pricing transparency and being able to switch effortlessly would increase switching rates. (House of Commons, 2011)
Inertia describes customers’ inclination to staying with one bank and not looking at other financial providers. Relevant identified factors for this were customers being comfortable with their current position, not seeing the advantages of switching or being afraid that errors will occur during the switch. (FCA, 2014)
High levels of satisfaction also have a negative impact on switching and reinforce customer inertia. The current study found that 82% of customers are very or fairly satisfied with the service provided and 81% claimed to be satisfied with their PCA as a product. It is noted that this satisfaction is not a result of good experiences, but rather a lack of unpleasant ones. (FCA, 2014)
Pull and push factors are responsible for removing this barrier, the latter being found to be more effective.
Pull factors are defined as factors that attract you to alternative financial providers, such as superior interest rates or incentives.
Push factors are defined as factors that distance you from your current financial provider, such as clerical errors, dissatisfactory customer service or branch closures. (D’Alessandro et al., 2012)
A study by EY (2014) found that the 5 most important reasons that led customers to open or close and account in the last 12 months were the following:
2.3.3 Opening and switching accounts
The FCA (2014) has reported that most consumers do not see the processes of opening or switching accounts differently. Both are associated with having to visit a physical branch, providing the necessary identification, significant waiting times and adapting to the new internet and mobile banking system. Similar to the case of customer inertia, risk of error together with a lack of trust in the financial institution have been identified as important deterrents at this stage.
It has been suggested that customers who have actually switched are not that concerned with these issues, compared to those that have decided not to go forward with the switch. This leads to the question of how many of these difficulties are actually real of just perceived.
2.3.4 Multi-banking
Multi-banking, which describes the phenomenon of customers using one than one bank for their financial needs, is on the rise both globally and in Europe.(EY, 2012) In 2012, the global percentage of customers that only used one bank, had fallen to 31% from 41% in the previous year. Conversely, the percentage of customers with 2 banks had risen from 7% to 20%. This is partially due to the ease with which information can be found online and price transparency in retail banking. They allow consumers to compare different financial institutions, choosing the ones with the products, services and rates they consider most appropriate. In some countries, consolidation in the banking industry has led to lower rates of multi-banking.
2.5Generational Differences
There are different opinions on how to define the birth ranges associated with generations and there is no clear consensus on which should be used as a standard.
According to Markert (2004), Gen X includes people born between 1966-1985 and Gen Y includes those born between 1986 and 2005.
A different classification based on a Pew Research study (Taylor and Keeter, cited in Turner 2015) names those born between 65-77 as Gen X, 1977-1993 as Gen Y and 1993-2005 as Gen Z. Turner (2015) describes Gen Z as the first fully digital native generation, having never experienced the world before the internet.
Regardless of the interval used, it is important to note that there are overlaps between generations. A person that is at the end or beginning of a generation can relate more with the next or former generation, making it even harder to find a definition based solely on birth years.
Krishnan (2014) discusses the considerable differences between generations, mainly between generation X compared to Y and Z. He refers to the latter as generation mobile, or Gen M. One of the major differences in behaviour is characterised by a shift from the need to “touch and feel” a product to the new requirement to “see and hear”. The latter generation is also more focused on convenience and removing friction from the buying process. Applying for a loan or swiping a card were presented as examples of friction. It is suggested that reducing friction would lead to an increase in transactions and customer engagement.
2.5.1 Views on Security & Biometrics
Reducing friction and the number of authentication methods required to log into mobile banking is something that Gen Y & Z want, but it has been problematic until now. Having easy access to an account makes it also easier for theft or fraud to take place, and the customer would hold the bank responsible for this.(Krishnan, 2014)
At the moment, banks are accepting the trade-off of having less convenience for added security. For the long term however, research is being done into finding new technologies and optimising the process for both convenience and security. This is crucial for banks, considering non-banks and challenger banks are coming up with new methods to compete.
Generation Z signals the need for a shift from security to convenience. 75% of them claim they would use biometric authentication methods comfortably and 69% think it would also be faster and easier than traditional methods. Half of them predict that passwords will no longer be used by 2020. (Biometric Technology Today, 2015)
They are also less concerned with security compared to other generations, 32% using only one PIN number and 14% only one password to keep their data safe. The percentage that share their passwords is also significantly higher than the general average. 34% have shared their card PIN with somebody compared to the general average of 23%, 32% have shared their smartphone PIN compared to 10% and 22% have shared their internet banking password compared to 7%. Biometric technology can satisfy their need for less friction while also insuring proper levels of security.
In regards to payment methods, fingerprint scanning was the most popular. Close to 70% of Generation Z respondents claimed they would rather use this type of authentication instead of passwords.(Biometric Technology Today, 2015) Biometrics, which included fingerprint, retina and DNA, were also rate far higher than traditional methods. This creates a viable environment for touch ID logins and cards using fingerprint scanners.
A report by EFT (1996) shows that biometric authentication technology has been available for some time and that MasterCard had already been testing its potential to increase security since 1996. They were looking at fingerprints, hand geometry, iris scans, retinal scans and voice recognition. In 2014, MasterCard together with Zwipe, a Norwegian firm, launched the first contactless card which features a fingerprint scanner (Biometric Technology Today, 2014) and are now working with Visa to make this the new standard for payment cards. (Biometric Technology Today, 2015)
2.5.2 Views on Innovation / Change in needs
The trend of multi-banking is less prevalent among Generation Y, where 45% of customers only bank with one financial institution. They use less financial products than the average consumer but have a high appetite for digital services, being number one in terms of mobile banking adoption. The members of Generation Y are the first to rate “good online banking services” as the most important reason to stay with a bank. This was chosen by 38% respondents, surpassing branch locations and low fees which each had 28%. They go as far as naming online as the most important channel.(Accenture, 2015)
This is a great opportunity for banks to offer tailored services, target their clients more precisely and offer them a richer experience, at a fraction of the price. Generation Y and Z have been found to be less good at managing money than the previous generation. Research has shown that they require basic money management services, which could come in the form of account aggregators for example. (Krishnan, 2014)
Focusing on these retention factors is also especially important for Generation Y and Z, since a US study identified the age group between 18-34 as most likely to switch banks. 18% have reported switching in the last 12 months, 8% above the North American average of 10%. Those between 34-54 were also at 10% while only 3% of those over 55 reported changing providers in the last year. (Accenture, 2015)
Some of these points are supported by a study conducted by EY(2014). It describes four distinct segments, with around 40% of members between 18-34 each, which are representative of the younger generation:
Traditionalists are less educated than most segments and have the most limited income. They use the lowest number of products, have average engagement, a preference for branches and are the most frequent users of ATMs. Despite this, they are responsive to new ways of doing business and loyalty programs.
Safety seekers are also less educated, have the smallest portfolios and limited cash flows and savings. They prefer using branches, have average engagement and value privacy and transparency in their providers.
New World Adopters are highly educated, with modest incomes but significant savings. They use technology frequently, are highly engaged and open to new channels or ways of doing business. They are the second most active group in opening or closing accounts
Upwardly Mobiles are highly educated, with high incomes and investable assets. They own the most products, are highly engaged but also the most active in opening or closing accounts. Financial advice in any form is something this group values and they can provide great returns if their issues are dealt with appropriately.
These 4 segments represent 55% of the UK population and 61% of the assets under management. The last two categories, which own 43% of the assets under management, do not see significant differences between banks and alternative providers. This, together with their high switching rates, can represent either challenges or opportunities for banks.
2.6 Summary
The literature review has presented many concepts regarding the retail banking environment and customer behavior in the UK. It is a very competitive and concentrated market, which traditionally had low attrition rates. A change in the behaviors of the new generation is altering the global landscape of retail banking. Key factors regarding acquiring and retaining customers are being redefined and digital services have become an important element of banking. Even the low attrition rates are being challenged, as switching banks becomes less uncommon for Generation Y and Z.
Convenience is becoming less about the location of branches and more about being able to easily access your bank through online channels. These effects can be presumed to be even higher in the UK, which is a global leader in both smartphone and mobile banking adoption rates. Banks must take these changes into account and revise their offering if they want remain competitive. As King (2015) argues, banks that delay investing in digital innovation will be the first casualties of this new wave.
3. Research Methodology
3.1 Introduction
This part describes the purpose of the research, how it was designed and why certain techniques were chosen by the researcher.
3.2 Objectives and Information Required
The purpose of this research is to understand the behaviors and attitudes of people from Gen Y and Z in relation to retail banking and innovation in the United Kingdom. It tests whether the results will be in line with what has previously been revealed in the literature review.
The main topics explored in the study are:
Banking selection criteria
Channel usage frequency and type of interaction
Views on safety
Views on Innovation
3.3 Research Design
Polonsky and Waller (2011 p91) named six stages that must be completed when undertaking a research project:
Problem definition
Defining the problem that is to be answered by research
Research Objectives
Establishing research objectives
Research Design
Choosing the proper framework for gathering the necessary data
Three main designs have been identified by Churchill (Cited in Polonsky and Waller, 2011), namely exploratory, descriptive and casual research.
Exploratory research helps the researcher gain insight into and understand the problem, being often used when there is not enough information available on a topic. Frequently used methodologies include secondary data and qualitative research.
Descriptive research illustrates functions or characteristics, such as attitudes, behaviors or market conditions. This type of research has a quite structured approach when it comes to collecting data and uses surveys, diary panels and observation as methodologies.
Causal research focuses on the cause and effect relationships of variables that affect the problem. This type of research has a structures approach, requires advance knowledge of the subject and is usually performed through experimentation in which hypotheses are tested.
Data Gathering
Collecting data which is either primary, originated by the researcher for the research topic at hand, or secondary, also known as existing data.
Data Analysis
Interpreting the collected data using different techniques, depending on the chosen framework
Presenting Results
Presenting your findings
According to Page & Meyer ( cited in Polonsky and Waller, 2011), quantitative research methods are techniques used to make projections for wider populations by using information from relatively large samples of respondents. These methods can be classified as descriptive or causal, both offering guidance to a final course of action.
The main kinds of quantitative research methods are: surveys, observation and experimentation.
Upon consideration of the different research designs, methods and constraints, undertaking descriptive research by means of a survey has been identified as the most appropriate option. Constraints include the duration of the study, financial requirements and knowledge of the area.
3.4 Questionnaire
According to Brace (2013 p6), questionnaires must collect information accurately and as little bias as possible.
Three steps are recommended for planning a questionnaire:
Defining what principal information is needed
Gathering secondary information required for the analysis
Mapping the flow of the questionnaire according to topics and question types
Structured questionnaires are composed of a sets of fixed-answer questions, arranged in a specific order according to topic areas and question types. (Malhotra and Birks, 1999)
A variety of methods can be used to collect the data from respondents and Malhotra et. al (Cited in Polonsky and Waller, 2011) compares them according to a series of criteria. The following table (Malhotra et al., Cited in Polonsky and Waller, 2011) presents three of the most common methods: telephone surveys, a type of personal survey and a type of electronic survey.
After considering the information above, using the internet or website survey method appears to be most feasible in our situation. The removal of interviewer bias, diversity of questions, quantity of data collected and low costs, speed and low cost are some of the some of the main reasons for this. Receiving a low response rate is an issue with this method of collecting data, which must be taken in account when designing the choosing the sample and its size.
3.4.1 Questionnaire Sequencing
The decision to have 15 questions, including the consent sheet and personal details, was chosen based on the relationship between online drop-out rate and length of the interview. A survey with 15 questions will have a 15% dropout rate. (Cape et al., Cited in Brace, 2013) An optimal number of questions will also ensure that respondents do not become bored or fatigued, leading to more reliable data.
The questions asked were mainly closed pre-coded multiple choice, as well as some follow-up open-ended questions asking for additional information.
The multiple choice questions use interval scales (p68 p51), general matrix scales and Likert scales.
Interval scales allow the respondent to rate different items on a scale. The distance between each point on the scale is numerically equal.
Matrix scales allow participants to evaluate rows of items by matching them with the items in the column.
Likert scales are matrix scales that ask respondents to what extent they agree or disagree with certain statements.
The order in which questions are asked progresses from general to more specific, making sure that respondents are asked about their behaviours before they are required to express their opinions. This is done to avoid bias caused by the respondent becoming aware of the researcher’s interest. General questions give the respondent a chance to think about the topic at hand by asking him to recall past experiences and prepare him for the attitudinal questions that will follow. Classifications questions have been placed at the end for several reasons. One reason is that they can be disruptive, due to the participant considering the information required private. Participants feel more comfortable providing this information after they are familiar with the content of the questionnaire. Another reason is that these questions are not related to the rest, and can confuse or interrupt the participant. Lastly, these personal questions can cause respondents to drop-off. If the questions are placed at the end and the respondent doesn’t answer them, his answers to previous questions will still remain recorded.
3.4.2 Question Design
In order to collect accurate data, it is important to avoid long, complex, or ambiguous questions. (p 110 )The vocabulary used must be accessible to everybody and overly technical terms must be avoided. Participants must not feel challenged or intimidated while participating in the survey, otherwise they will feel left out and will make minimal effort to answer accurately. (Brace, 2013)
+p100
Constructing balanced attitudinal questions requires presenting all aspects of a dimension in the same way and it is recommended to have more options than yes and no. This is due to the tendency respondents have to agree with the opinion being presented to them if they perceive it as more socially acceptable. (Brace, 2013)Full balance is achieved by restating the question in a negative form while minimal balance only requires presenting a negative option as well. For example, a minimally balanced question could ask if something “is or is not likely” whereas an unbalanced question would only ask if it “is likely”. Schaeffer et al. (2005, cited in black book) found that there were almost identical results when using the two different methods. In order to keep the questions as clear and concise as possible, the latter option was chosen for this questionnaire.
The “Don't Know" option has not been added to the Likert scales in order to making respondents decide on an answer which is either positive or negative. It has been found by Coelho ( cited in Black book) that the " Don’t Know” middle point was often used by respondents who did want to take the time to consider the question, thus skewing the results. Removing this option can offer more reliable and valid data, while also decreasing the central tendency. Central tendency is caused by respondents avoiding options on either extreme of the spectrum, resulting in more results in the middle. In the case of online questionnaires, investigations have found that very few participants drop out due to the absence of middle points.
3.5 Sample Size and Population
The group that this study wishes to investigate, also known as the population, is people under 30 that live in the UK. Due to financial and time constraints, a subgroup of the population of interest, called a sample, will be used in this study and the findings will be projected onto the entire population. (Saunders et al., 2012)
According to the 2011 census, there are 23,702,000 people in the United Kingdom between the ages of 0 and 29. (2011 Census: Population and household estimates for the United Kingdom)
According to Saunders et al.(2012 p266), for a population of over 10 million, with a 95% confidence interval, 5% margin of error and 50% percentage value, the required sample size would be 384. In order to reach a more feasible sample size, the margin of error has been increased to 7% and the resulting sample size is 196. This can be calculated using the following formula (SurveyMonkey):
Where:
N= Population Size
z= Confidence interval (z-score)
e= Margin of Error (as a decimal)
p= Percentage Value (as a decimal)
This figure represents the number of respondents we require for our sample, but it does not take the response rate into account. The response rate can be calculated by dividing the number of completed surveys by the number of non-responses plus completed surveys. Non-responses are categoriesed into four levels(Saunders et al. 2012):
complete refusals ( none of the questions were answered)
breaks-offs (less than 50% of the questions were answered)
partial response ( between 50-80% of the questions were answered)
complete response (over 80% of all questions were answered)
The number of questionnaires that are sent out needs to be adjusted by this. Fisher (2010 p208) names 70% as a feasible response rate among employees in an organisation, due to the researcher’s ability to follow up participants and possible prior contact with them. A general survey would only have a response rate of only 30%. By using individual collectors to track response rates and contacting people directly or through people they have prior relations to, a response rate of over 70% is expected in the study.
After the adjustment, the number of questionnaires that have to be sent out is 280. As mentioned previously, this will likely be lower if the response rate is successfully increased.
Where:
n = Sample Size
RR = Response rate ( number of completed surveys divided by the number of completed questionnaires and non-responses )
In order to have a sample that is not biased and as representative as possible, respondents were chosen from different cities across the UK, with different ages under 30 and similar number of men and women were included. The snowball sampling technique was used, which involves selecting an initial group randomly and asking them to refer more respondents that fit the requirements of the survey.( Polonsky and Waller, 2011) pp 140
3.6 Pilot Test
Piloting a questionnaire helps verify that the questionnaire is reliable, valid and free of error.(Brace, 2013 p191) Reliability is the quality of providing the same distribution of responses if it were to be repeated in the same settings. Validity is related to whether or not the questionnaire is fulfilling its purpose and measuring what it is supposed to measure.
The pilot test was shared with 10 people, who were asked to provide feedback and answer a series of questions upon completing it. Based on their feedback, some fine tuning was performed in terms in terms of phrasing and positioning of some elements in the questions, such as explanations or pictures.
3.7 Limitations
Electronic surveys can have a number of disadvantages that limit their effectiveness. Random sampling errors are instances where the selected sample members are not chosen appropriately and do not represent the population being studied.(Malhotra et al., Cited in Polonsky and Waller, 2011) This survey method requires participants to have access to the internet, something which is not representative of the whole population.(Forest, Cited in Polonsky and Waller, 2011) It is also harder to control the sample and data collection than in the case of personal surveys. The anonymity of respondents allows them to provide false information and bypass the screening questions, leading once again to random sampling error.
Response errors appear when participants respond inaccurately or their responses are misinterpreted and can be caused by both the researcher and the respondents. The wrong questions can be asked(surrogate information error), the population or sample can be defined incorrectly(population definition & respondent selection error), the data can be measured or analyses inappropriately or the respondent can be unfamiliar with the topic and unable to answer.(Malhotra et. al, Cited in Polonsky and Waller 2011)
The main limitation of the snowball sampling technique is that it is more time consuming than other methods and relies on the willingness of the initial group to refer other participants. (Malhotra et. al, Cited in Polonsky and Waller 2011)
3.8 Data Analysis
The results of the questionnaire will be presented in graphical form, appropriate statistics will be calculated and t-tests will be performed, where necessary, to verify the significance of the results. These will be followed by brief interpretations which include inputs from the open ended questions.
3.8 Summary
This study aims to confirm or infirm whether certain characteristics identified previously in literature are applicable to the generations Y and Z in the UK. It focuses on their banking habits, selection criteria, appetite for technology and views on security.
The survey method, more specifically a website questionnaire, will be used for data collection from a sample of 280 students, with the goal of receiving 196 responses.
A pilot test of the questionnaire has been performed on a sample of 10 students, but no majour changes had to be implemented as a result of it.